photo credit: Effigy Consulting

 

November 29, 2017

 

Our Partner, Effigy Consulting (http://www.effigy-consulting.com/), have recently completed a study of the European CEP market with the involvement of Last Mile Experts in panel reviews.

Here are some key findings:

• Whilst GDP grew by 1.9%, the European CEP market increased by 6.5% in valueand by 9.5% in volume, at a faster pace than in 2015. This can be explained by a more favourable economic environment and by the ever-expanding and growing e-commerce industry everywhere in Europe.

• The fastest growing segment is the International Extra EU one, due to the increase of Chinese imports (by more than 45%). This growth would be even stronger if Small Packets (light items carried through Mail products) were included.

• B2C continues to be the other most dynamic segment. Cross-border e-commerce is developing at a strong pace (B2C Intra EU Export grew by more than 10% in value and by more than15% in volume, faster in volume than Domestic B2C.

• The C2C market is being addressed by other players than the traditional Postal operators and carriers with a strong PUDO network are active on the C2B (Return) segment.

• The Top CEP markets in value, are Germany (24%), United Kingdom (20%), France (12%), Italy (8%), Spain (8%), Netherlands (5%) and Poland (3%), which together represent ~80% of the total market value.

The Top CEP markets in volume, are Germany (29%), United Kingdom (24%), France (9%), Spain (5%), Italy (4%), Poland (4%), Russia (4%) and the Netherlands (4%).

• The Major domestic and cross-border operators recorded above market growth in terms of revenue in 2015/2016: DHL Parcel, DPDgroup, GLS, Hermes, Poste Italiane Group, and Posten Group.

In terms of volume, DHL Parcel, DPDgroup, GLS, Hermes, Poste Italiane Group and PostNL recorded above market growths, primarily driven by the development of e-commerce. Overall, the Russian Post recorded the strongest growths, thanks to a strong B2C market, macroeconomic developments and imports from China.

• On the side of the operators, consolidation continues and the most important acquisitions of 2016 were the acquisition of TNT by FedEx (completed May 2016), GLS’s acquisition of ASM, and DP DHL’s acquisition of UK Mail.

The overall 2016 European CEP market* is estimated at:

• 53 billion Euro

• 9.6 billion parcels

This report is a great way to understand key trends and developments. What is interesting for me is China's continued (often "behind the scenes") work on developing effective European delivery solutions to Europe...will they really "take it all" in growth, soon? Less surprising is the the seemingly unstoppable growth of B2C. Both are great news for Last Mile stakeholders :) Any views?

 

  


 

 

Photo credit: hepsiburada.com

 

October 14, 2017

 

 

According to a recent report by Bloomberg, Goldman Sachs Group Inc. is fielding bids for hepsiburada.com which could lead to Turkey’s largest technology deal.

According to the Hanzade Dogan Boyner the Chairman of the company (pictured above), Hepsiburada is receiving buyout offers, but she declined to comment on speculation that one of the companies interested was Amazon, which established an office in Turkey in August.

Goldman, is taking care of bid acquisition so that the business can focus on day to day activities. Hanzade Dogan has said that “We like to always consider our options. The interest in Hepsiburada is there." She also states that there is “relatively manageable” infrastructure for quick deliveries.

Similarly to it's "big brother", Amazon.com, part of Hepsiburada’s strategy involves building the web infrastructure for other e-commerce aspirants. Last year it launched a marketplace platform, which now hosts more than 8,000 merchants. This year it opened Hepsiexpress, which enables last-mile delivery and transport management for sellers in Istanbul and will soon be expanded to other cities. It also has a payment system called Hepsipay.

The company is “cash-flow positive,” Hanzade Dogan Boyner said, declining to provide details except to say that it was the largest by revenue in Turkey. Sales nearly doubled in 2016 when Hepsiburada launched its marketplace, and growth this year will “normalize” to about 40 percent, she said. The site has more than 12 million product listings and receives 70 million monthly visits, of which 85 percent are from people coming directly to the website or the mobile app. Those numbers dwarf the figures of other e-commerce players in the region including Dubai-based Souq.com, which claimed 23 million monthly visits and more than 400,000 products when Amazon acquired it in March.

Ok, so what's my takeout on this? While, I am a self-admitted fan of Turkey, this is a nice business with a strong position in one of the largest markets in the region. Turkey's SME culture would seem to match a marketplace like this and, despite political uncertainty, it would seem to be an opportunity not to be missed. My personal bet is that Amazon is in the running, but let's see...we will be sure to find out, sooner or later!

I can't let this go without a short aside on our core area at Last Mile Experts. Here, I would be less positive about the current situation. E-commerce last mile infrastructure is poor and will require significant efforts to match best in class markets such as the UK. I believe that Hepsiburada is right to develop their own infrastructure and "learn the ropes" , but they will still need to rely on capacity from Turkey's other carriers. Today, none of the operators is able to offer a truly customer centric service and no effective PUDO or "access point" network exists (a recent test by Bukoli folded several months ago). I suppose I shouldn't be too concerned though, this means lots of opportunities in the Last Mile space! Any views?


 

 

Photo Credit: Radiocool.lt

 

August 12, 2017

 

According to a recent press release, Omniva’s (Estonian Post to the uninitiated) growth in the first half-year was mostly thanks to the development of e-commerce

Omniva state that in the first half-year of 2017, their commercial revenue grew by 25% compared to the same period last year and there was growth in all of Omniva’s business areas. The growth was mostly thanks to the rapid development of e-commerce, which increased the revenue of Omniva’s international business, as well as that of parcel services provided in its home market, the Baltic countries.

In the first half-year of 2017, the group’s total commercial revenue was 51.8 million euros, which was 25% more than in the same period last year. Omniva has shown growth of this magnitude for several quarters in a row, now.

International business: still the most rapid growth

International business continued to be the area with the most rapid growth in the Omniva group in the first half-year of 2017 – 76% compared to the same period last year. The main focus of international business is the logistics of parcels from Chinese e-commerce.

Parcels Business: growth in the entire Baltic region

The group’s revenue from the parcels business grew by 14% in the home market, the Baltic region compared to the same period last year. The Parcels Business had an especially significant increase in Latvia – 65%. In Lithuania, the revenue from the parcels business grew by 25%.

“The expansion of Omniva to Latvia and Lithuania and addressing the entire Baltic region as its home market has been the right decision,” says Joona Saluveer, Omniva's CEO. “More and more customers want to receive a complete solution for parcel services in the Baltic countries and Omniva is able to successfully provide it.”

The biggest network of parcel machines in the Baltic region also helped increase the revenue of the Parcels Business Unit. As the demand for parcel machines is growing, Omniva plans to expand its network of parcel machines in Estonia, Latvia, and Lithuania this year as well.

Postal services: decline in traditional services, increase in revenue from new solutions

The revenue from traditional national postal services continues to decrease. Total revenue from postal services in the first half-year of 2017 increased by 1% compared to the same period last year, and this was thanks to finding new segments and solutions beyond the traditional postal services.

Omniva focuses on providing the universal postal service throughout Estonia and the company is constantly looking for new opportunities in the conditions of changing demand for doing this in a modern way that is as convenient for the customers as possible.

“People’s consumption patterns, as well as the way they use the services have changed, which means that post offices are increasingly becoming places for receiving and sending parcels, as well as for advising customers on the use of different services,” said Saluveer.

"Ok Marek, so why talk about a (relatively) small postal operator in one of the smallest countries in Europe?", you may ask. Well the answer is simple; like most Estonians I have come across, these guys are progressive, smart and seem to be doing more things right than their bigger competitors.

"But what in particular?", would be your next question. From my perspective they have taken the right strategy both domestically and internationally, and here are some of the reasons why:

Domestic:

  • When I was managing the Baltics at GeoPost/DPD, the only Postal Player to be stronger than us in any of the Baltic countries was Omniva. This is because they were able to embrace innovation and understand (like Amazon do) that customer experience is the holy grail for any last mile operator. Try as we would, we got close, but never beat them in their home market.
  • So what sort of things are important here? For me, development of IT, people and "asset sweating" (the last point is pretty important when you have a post office infrastructure!). Today's e-commerce customers want choice and control, and that's why things like interactive delivery management, attended and unattended delivery (via access points and more recently, parcel lockers) are so important. From what I can see, Omniva have been the "best in class" Postal Operator in the Baltics in this respect. Right now, only DPD is able to give them a "run for their money".

International:

  • With a population of a little over 1 million, the Estonians are right to look internationally in order to generate growth. The Baltic states, together, are some 6 times larger...and Europe is in another league altogether
  • The Baltic States are closely linked culturally and economically; many customers require a seamless, Pan-Baltic solution
  • Estonia is "hi tech" and agile and that is how a small post on the far Eastern border of the EU has been able to become a gateway for SF Express (Chinese parcels) to the EU rather than better placed (geographically and with a rail link to China) and larger Polish Post, for example
  • To become a gateway and fulfilment partner for the Chinese a few things are important: flexibility, quality, ability to deliver complete solutions and to do all this at attractive prices

So how tenable is this international growth? The answer is, "I don't know". SF volumes are reportedly being generated at very low prices and so we would need to see the effect on profitability.

Of course, the better Omniva get at this game, the more likely they are to create scale economies and value added services that can be charged for. I personally, am optimistic, although it would be interesting to see EBIT data as well as revenue...Any views?

 
 

 

 

Photo credit: amazon.com

 

August 11, 2017

 

While Amazon is continually expanding its range of virtual services, unlike many other e-tailers, it has understood that the "make or break" will be in the last mile.

Supporting this view, Amazon has announced, with little fanfare, a new service called "The Hub"; parcel lockers installed in residential buildings, so that tenants can pick up parcels at times which are convenient for them.

"The Hub" is a development of a service that Amazon has been running for some time now, called Amazon Lockers; parcel delivery lockers that are located in public places and retailers to make pick up and delivery of Amazon parcels more convenient and efficient.

What is important here is that the service is carrier agnostic and will be available for parcels which are not fulfilled by Amazon. In their words: “You can pick up any package, from any sender, any retailer, at any time,”

Now this may well send panic waves to the likes of UPS, DHL or FedEx; is this the first step towards creating a "stand alone" Amazon parcel delivery business, which will compete directly with them?

After all, Amazon has already experienced success in their "in house" last mile delivery operations in places such as the UK, US, India, France and Germany.

Well, let's start by understanding why Amazon is working with Lockers at all. I believe that there are a few reasons, the key ones being that:

  • a great customer experience in the Last Mile requires both "to door" and "access point" delivery options
  • locker delivery is cost efficient as the courier is delivering 20+ parcels at a time, instead of a similar number of individual door step deliveries
  • most lockers are open for delivery 24/7..and will always accept the parcel (unless, of course, they are full)
  • lockers are proving to be highly regarded amongst users, where they are properly used

So what's the chance that Amazon has really decided that the (virtual) world is not enough, and plan to set up an independent Amazon Parcel Delivery operation?

As part of Amazon's Last Mile start-up team, I know where I would put my money...Any views? 

 

 

 

 

 

August 10, 2017

 

 

 

In my post about a year ago http://www.dpdhl.com/en/investors.html following DHL Parcel's acquisition of UK Mail, I discussed the reasons for investment in a multi domestic (e-commerce) footprint in Europe. So what has happened since then?

Well, from the above slide, it looks like Achim Duennwald and his team have been working hard and have developed the backbone of a pan EU network. While this may seem easy for a player the size of DP/DHL we need to remember where they have come from: at the height of "express fever" important domestic BU's were closed or disposed of. In fact, the Parcel team inherited strong businesses, mainly in Germany, Czech Republic and Poland but also, "white spots" in many "must have" markets.

So far, they seem to have Western Europe "sewn up" with the one notable exception of Italy....which I believe they already have a solution for. What is left, is the growingly important Central and South Eastern European region. Here there is much work to do as there is no, even vaguely realistic, one stop partnership (other than, possibly, AT Post). Options include targeted acquisitions in more important markets and partnerships elsewhere. After over 10 years in this region, I know very well how time consuming, but also how rewarding this can be.

The key thing now, is to move fast, while opportunities still exist. It will be interesting to observe DHL Parcel's next steps, if they are the right ones, DPD and GLS (currently the best pan EU road parcel networks) will have a dangerous challenger for primacy. Any views?

 

 

 

Beijing - Mobile consolidation point?

 

June 27, 2017

 

 

I am currently travelling in China and am quite overwhelmed at the pace of infrastructural and general commercial development. In particular, I cannot help but observe the number of couriers visible, more or less everywhere, in Beijing.

What has also gained my interest (apart from the rather cool and clearly ecological delivery vehicles), is the fact that the majority of the couriers I have seen are running at, or close to capacity…and I assume that we are not even in peak season, right now. OK, this is Beijing, but it is still amazing.

China’s Courier, Express & Parcel (CEP) players will have to think about investing in technology and infrastructure to support their operations. While my Chinese is (unfortunately) non-existent and I couldn’t talk with the guy in the photo, I assume that this he is running a sort of mobile “access/consolidation point”? Interesting approach…

As we all know, the Chinese are pretty smart, but I expect that the sheer size of the Last Mile challenge out here will prove to be a real challenge, as well as opportunity for the incumbent CEP players. Any views from those amongst you who are closer to this exciting market?

 

 

 

 

11 March, 2017

 

According to a recent press release, tiramizoo GmbH, the German start-up with a focus on same-day, last-mile delivery, announced it has completed an investment round led by Shell Technology Ventures B.V. (STV) with coinvestment by Daimler AG.

This investment will support the development of tiramizoo’s urban logistics platform and the pursuit of new business models in the Asia-Pacific region. In addition to Shell and Daimler, tiramizoo’s major investors including DPD Germany, Bayerische Beteiligungsgesellschaft and Bayern Kapital are maintaining their investments.

tiramizoo is a leader in the new and rapidly growing sector of same-day delivery. The tiramizoo product – an app, platform and back-end technology — interfaces retailers with customers to schedule local delivery services of their purchases in over 150 cities in Germany, Austria, Sweden and The Netherlands. tiramizoo already serves international retail players such as Zalando, MediaMarkt and Saturn.

Roger Hunter, General Manager for Digital Businesses at Shell New Energies said, “We are pleased to close this deal through Shell Technology Ventures. We are impressed by tiramizoo’s deep knowledge of the urban logistics sector and their innovative technology platform. This investment will also support Shell’s strategic interest in developing new digital business models that benefit customers by facilitating the efficient movement of goods and people in crowded, growing cities.”

The financial transaction, will allow STV and tiramizoo to combine their knowledge of digitally enabled mobility services, extending the existing tiramizoo platform to build new products and expand to new markets. This novel, connected approach to transporting goods more efficiently reflects Shell’s existing interests in freight optimisation to decarbonise and improve local air quality in the transportation sector in a sustainable manner through hydrogen electric, e-mobility, biofuels and gas-to-liquids platforms.

"We are delighted that STV is on board as an investor in tiramizoo,” said Michael Löhr, Founder and Managing Director of tiramizoo. “The arrival of Shell as global energy leader means that we have a strong partner in the field of mobility and logistics services.” Managing Director Thomas Bluth adds, “We shall use the new capital to step up the development of our technology and further refine our operational processes." About tiramizoo tiramizoo GmbH is one of the most innovative logistics platforms in Germany and is the country’s leading same-day delivery provider. The company was established in 2010 by the three founders Michael Löhr, Volker Schneider and Philipp Walz. A fundamental factor in the company’s success is its proprietary software which places particular emphasis on providing a delivery service which is not just efficient, but ecological and environmentally responsible, too, with customers experiencing a relatively inexpensive, reliable and fast service. 

While it is understandable that DPD is amongst the investors and even Daimler, but Shell's leading of this round is interesting. This shows just how important last mile delivery is becoming to all assoicated sectors from e-tailers right up to fuel suppliers. Let's see if this will be the shape of things to come. Any views?

 

 

 

 

Jun 7, 2016

 

Heather was not in the best of spirits this week, since she had taken over as logistics Director for a leading e-tailer she had realized that the last mile was far from easy…especially as a large part of her assortment were white goods.

After several trial runs, she had only just found a reasonable solution for carrying what suppliers call “big, heavy & ugly” items. She had even been able to arrange some kind of interactive delivery and weekend or evening deliveries. Now she had learned that according to the so called EU “WEEE Directive” she would need to ensure that of the goods delivered (by weight), 65% of the old ones would be collected for recycling. This implied a carry in service and “swap” of items.

The problem was that in her country, there were almost no “white glove” (specialist, value added services including carry in, mounting/connection and removal of old items) suppliers with national coverage. Some of her competitors had set up "in house" last mile capability but this was expensive to set up and her boss had doubts whether they should get into an area that was not core for them.

You can imagine her delight when her XPO sales representative called, later that week, to inform her that they had just bought a local company and were about to introduce a high quality “white goods” service. “Just what the doctor ordered” she murmured to herself with a wry smile.

The WEEE Directive is actually good news for the environment but is a real challenge for e-commerce and their last mile carriers. While officially it’s the producers responsibility, it will be, in practice, the retailer who will need to organise the last mile in most cases. “Producer responsibility” means that a minimum collection rate is achieved annually. From this year, the minimum collection rate will be 45 % calculated on the basis of the total weight of WEEE collected expressed as a percentage of the average weight of EEE placed on the market in the three preceding years. Countries will need to ensure that the volume of WEEE collected evolves gradually during the period from 2016 to 2019.

From 2019, the minimum collection rate to be achieved annually will be 65 % of the average weight of EEE placed on the market in the three preceding years in the Member State concerned, or alternatively 85 % of WEEE generated on the territory of that Member State.

This means that, within a few years (unless a system of draconian fines are implemented to ensure the public recycle themselves) delivery to curb side will not be a viable solution for white goods in that most deliveries will need to be “carry in”…as well as “carry out” of the old item. Today there are very few scalable specialists in this field; Rhenus, XPO and a handful of others. This will be an interesting area of opportunity…and risk for those e-tailers who are not prepared. Any views?

 


 

 

 

May 16th 2016

 

Jack had been with  Slavonia Post for almost 30 years now and he was recognised as one of the most able managers in the company.  After years of declining letter revenues and major competition from private carriers in the lucrative parcel business, the organisation was not in good shape either financially or in terms of its customer offering.

Nobody had been very much surprised when, some 12 months ago he had been nominated as CEO by the Minister of Infrastructure, "If Jack can't help us, who will?" the minister was apparently quoted as saying. Since his nomination, Jack had worked tirelessly to convince his supervisory board and unions (as well as his own management team) that it was e-commerce that could save the day for Slavonia Post. Despite push back from the unions, who didn't want new work practices or PDA's (handheld terminals) which they claimed were like a "spy in the post-bag", or concerns from the Minister that the already significant financial loss would be aggravated by the investment this entailed, Jack persevered. He had even found a way to circumvent the financial restrictions on salary and hire Krys, a top CEP Manager, to head the parcel division.

Despite the barrage of criticism he had been deflecting for several weeks now, the big day had arrived. Mississipi.com had just transferred over 70% of their business back to the postal operator. Their Regional VP had said during the negotiations that with the new customer experience Slavonia Post were offering, supported by interactive delivery, "to door", "to access point" (open 24/7 in many places and never further than 10 minutes from the consignee) and "hassle free" returns, they were clearly the best supplier in the market.

Winning just this one account, will increase parcel volumes by 30% and make the Post a leader in the segment, once again, not mentioning additional sales to the customers who come to the post to pick up their parcels.  Suddenly Jack's critics were singing a new tune... 

So how far from reality is this story? Actually, not so far at all. The largest e-commerce players  are almost always the most important parcel shippers in markets where they have a local site. Also, the National Posts almost always have the largest and most "local" infrastructure of access points due to their legacy network and universal service obligation. So why is it so difficult for many of them to make e-commerce business "theirs".

As any experienced postal manager will correctly point out, "things are not so simple", there is the issue of convincing the various, highly influential stakeholders (politicians and unions to name but two), the costs of adapting to the needs of e-commerce, not to mention the challenge of getting specialists on board who know this space.  But the benefits are clear and when you look at what some large Postal Operators La Poste or Deutsche Post are doing or other smaller, but agile Posts like Posten (NOR), Posti (FIN) or Eesti Post (EST) it is clear that success in e-commerce is not only a pipe dream.

 

Any comments?

 

 


 

 

 

May 9, 2016 

 

Greg loved his job in purchasing ; he was the guru of cost cutting and knew all the tricks of the trade. With his hand on his heart Greg could proudly claim that his company had the best last mile delivery rates possible. In fact, he had just managed to beat his carriers down by a further 5%...and cut the fuel surcharge to boot!

Imagine his surprise when his new boss (who had an obsession for customer experience) called him in to say that the game rules had changed, it wasn't all about price any more but about great customer experience...,of course, at an acceptable price.

He just didn't get it, but luckily he knew someone who did. His mates Krys, and Marek had set up a specialist consultancy to advise people like him on how to look at last mile from a customer perspective and maximise shareholder value and not just minimise costs. "Guys you are a Godsend" he said, once he  had understood how to play the game according to the new rules....and the customer ratings started rocketing!

As discussed in an earlier post, the "last mile' is becoming a key differentiator in customer acquisition and retention. It will be the players who are able to offer the consignee flexibility, control and quality courier interaction who will win the day. Not surprisingly, to do this, the last mile operator needs "state of the art" systems, alternatives to home delivery (such as local access points or lockers) as well as a stable team of couriers who are motivated and really care about the customer.

So what's the point here? Well, the point is that if we do the maths, we may well find that on top of saving on complaint management and reducing customer attrition, we will sell more, to more customers if we are able to make the "last mile as easy and comfortable as the first click" to order. In many cases, we have seen that on top of the long term commercial benefits, a more expensive but better last mile, is  actually cheaper  than the "low cost" alternative. 

 

 

Any views?

 

 


 

 

 

May 3, 2016

 

In 2014 Ruch's turnover was some  400mlln EUR and it is a leading press distributor with some  30% of the market reaching some 20,000 points of sale in Poland. Ruch also has a CEP product (Paczka w Ruchu).

Apparently, Eton Park are open to sell off the business units independently and while Paczka w Ruchu does appear to have preformed particularly well over the last few years, this is one of the last opportunities to invest in a last mile network of any scale in Poland (following the sale of KEX, also part of a press distribution group, to Geis in 2015).

 

It will be interesting to see what happens...